Stocks Slumps as Banks Fall; Dollar Rises

Stocks slumped, after fluctuating much of the morning, as financials fell and the dollar added to gains.

The Dow Jones Industrial Average fell more than 60 points following an upbeat session on Thursdaydriven by stabilizing prices for oil and other commodities, and a modest drop in the dollar.

JPMorgan led the blue-chip index lower, while Kraft gained.

TheS&P 500 and the Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 16.

Among key S&P 500 sectors, financials fell, while healthcare rose.

The dollar rose slightly against a basket of currenciesafter the inflation report, which put pressure on stocks of companies that benefit from a weaker dollar for overseas sales.

"Today’s action is starting to feel like a Friday in the summer, where people who are active in the morning are selling and shorting," said Rick Fier, vice president at Conifer Securities.

Fier said the pattern usually reverses in the afternoon, as the market rallies into the close.

Overall, Fier said he expects to continue to see the commodities trade (meaning skyrocketing commodities prices) unwind, as investors move money from commodities and commodity-related energy and materials stocks into other sectors, like technology.

"We feel better about the market now than we did when the (commodities) market was parabolic," Fier said.

One stock he has his eye on is Apple , which has steadily traded in the range of about $343 a share for about four months. According to Fier, the "consolidation" in Apple shares is a good sign. When the stock moves higher, to a new high of $363 a share, "that would be a real bullish sign."

Contributing to the negative sentiment has been mixed earnings guidance from companies delivering earnings results this week, said Doreen Mogavero of Mogavero Lee, a brokerage.

"I think a lot of people are paying attention to guidance this week," Mogavero said. "There seems to be some concern about the future," she added. "More and more people are talking about the fact the economy is recovering slower than we thought it would."

Citigroup traded slightly lower despite news the bank would resinstate its quarterly stock dividend to one cent a share, payable on June 17.

Yahoo sank after news the Alibaba Group, which is 43 percent owned by Yahoo, restructured Alipay, one of its businesses, without the knowledge of Yahoo or Softbank, another stakeholder.

AIG gained after it was upgraded to "market perform" from "underperform" at Wells Fargo. AIG is in the process of preparing a secondary stock offering.

Tyco shares gained after a report in the New York Post that the company is in early-stage talks with Schneider-Electric for a $30 billion, citing sources close to the situation. But a spokesman for Schneider, a French company, denied the report and said no deal was in the works.

In earnings news, Dillard's soared after reporting a 57 percent profit gain and sales and margins improved, while Nordstromslumped after reducing its outlook for the year.

Nvidia , meanwhile, sank after the chip maker cited worries about competition in PC graphics. Citigroup and Bank of America cuts the company's price target, while Needham cut the company to "hold" from "buy." But FBR raised Nvidia's price target to $23 a share from $22.

In other retail news, Wal-Mart traded flat after news the retailer plans to buy a minority stake in the holding company for Yihaodian, a Chinese e-commerce firm.

Health care stocks got a boost from JPMorgan, which upgraded the sector to "overweight" from "neutral." Agilent , Cigna and Aetna gained.

Elsewhere, Facebookhas admitted that it had secretly hired a PR firm to generate stories critical to the way Google handles privacy.

In initial public offerings news, BATS Global Markets, an electronic exchange for stocks and derivatives, plans to sell stock to the public. The amount of the offering hasn't been determined.

Oil prices rose slightly, but were off their highs. U.S. light, sweet crude rose above $99 a barrel, after trading higher than $100 earlier, while in London, Brent crude rose to more than $114.

On the economic front, the Thomson Reuters/University of Michigan preliminary consumer sentiment indexfor May rose to 72.4 from 69.8 in April. Economists surveyed by Reuters had expected the index to rise to 70.

The consumer price index gained 0.4 percentin April, largely due to rising food and energy costs, compared with a 0.5 percent gain in March, the Labor Department said. The result was in line with expectations.

The core CPI, which excludes volatile food and energy prices, rose 0.2 percent in April, up from a 0.1 percent gain in March, the government said. Gasoline prices rose 3.3 percent in April, which accounted for nearly half the rise in the overall CPI.

And in politics, talks about the debt limit are embroiled in chaos.

European shares bounced back on better than expected economic growth data in euro zone engine Germany and in France.

But the Greek debt problem continued to unfold, with Greek Prime Minister George Papandreou saying that the current spreads of Greek bond yields over those of other euro zone states were not sustainable in a monetary union.

Meanwhile, European Central Bank Governing Council member Ewald Nowotny said Greece seemed not to have met the terms of its international bailout lately.

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